AP Microeconomics 3.3: Long-Run Production Costs
Analyze long-run production choices by calculating LRATC and identifying economies of scale, diseconomies, constant returns, and efficient scale.
- Syllabus
- Effective Fall 2025
- Course
- AP Microeconomics
Covered syllabus points
3.3 Long-Run Production Costs question 1
[Maximum number: 2]
Deskward is a typical profit-maximizing firm that produces and sells wooden desks in a
constant-cost, perfectly competitive market that is in long-run equilibrium.
Question (a)
(a)
Deskward also produces chairs. Deskward increases its production from 500 chairs to 600
chairs, and its long-run total cost increases from $80,000 to $108,000.
[ 2 ]
Question (i)
(i)
Calculate Deskward's long-run average total cost of producing 500 chairs. Show your
work.
[ 1 ]
| E (i) Point 9 | Calculate the long-run average total cost (LRATC) as \160 per chair and show your work. \[ \text { LRATC at } 500 \text { chairs }=\frac{\80,000}{500}=\$ 160 \] | 1 point |
|---|
Question (ii)
(ii)
As Deskward increases production from 500 chairs to 600 chairs, is Deskward
experiencing economies of scale, diseconomies of scale, or the efficient scale? Explain
using numbers.
[ 1 ]
| (ii) Point 10 | State that Deskward is experiencing diseconomies of scale and explain that as output increases from 500 to 600 chairs, its LRATC increases from \160 to \180 (=\$108,000/600) per chair. | 1 point |
|---|
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